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Global macro analysis for 19/10/2017

Global macro analysis for 19/10/2017:

In New Zealand, The Labor Party will form a cabinet with the support of the NZ First. The NZD/USD rate is almost 1.5% lower, so this violent reaction of the market is a sign that investors strongly favor the coalition of the Conservative Party with NZ First instead. Moreover, the sudden turn of the events on the New Zealand political scene turns out to be a gigantic surprise. New Zealand First (NZF) decision to enter the coalition with the Labour Party (LP) was announced by the leader of this group Winston Peters. As he explained, NZF came to a decision between - as he put it - "changed status quo and change" and decided to move towards change. The LP and NZF coalition will also be supported by the Green Party of New Zealand (GPA).

The Prime Minister for the 52nd New Zealand Parliament will be Jacinda Ardern, the Leader of the Labour Party. The 37-year-old Ardern, who led the Labor Party on August 1, will be the third woman to serve as head of New Zealand Government and the youngest leader in recent years. Due to its young age, the rapid rise in popularity and charisma is compared to Canadian Prime Minister Justin Trudeau and French President Emmanuel Macron.

Let's now take a look at the NZD/USD technical picture at the daily time frame. After the political news hit the financial markets, the reaction was very strong. The price broke through the technical support zone between the levels of 0.7089 - 0.7058 and is currently trading below this levels. The next support is seen at the level of 0.6970, but the price might first bounce from the golden channel line support around the level of 0.7000. The oversold market conditions support the short-term recovery bias.